Last week, the stock market continued its upward trend, driven by the enthusiasm surrounding big tech. Positive economic reports also contributed to investors' belief that the Federal Reserve has successfully achieved a soft landing.
The Dow and the S&P 500 reached new highs early in the week, thanks to the resurgence of the "Magnificent Seven" stocks. These stocks, which make up 28% of the S&P 500 Index, were in pole position as investors remained bullish about artificial intelligence and rewarded cost-cutting measures at many tech giants. While the rally lost steam on Friday, the market made slow but steady gains throughout the week.
Last week's significant economic news was better-than-expected economic growth and inflation figures. Real Gross Domestic Product (GDP) grew at an annualized rate of 3.3% in Q4 2023, which was above Wall Street's consensus expectations of 2%. The Personal Consumption Expenditures (PCE) Index, one of the Fed's preferred measures of inflation, showed that core inflation (excluding food and energy) had cooled in December, with an annualized rate of 2.9%, beating consensus expectations. Core inflation was at 3.2% on an annualized basis, the lowest it has been since March 2021. Although this update did not have a significant impact on the market, it did help validate investors' optimism that the Fed's policies have maintained economic growth while bringing inflation down.
Source: YCharts.com, January 27, 2024. Weekly performance is measured from Monday, January 22, to Friday, January 26.
Earnings Season Feeds FOMO
Investors were optimistic about the Q4 earnings news from some of the largest companies. The market momentum was fueled by the "fear of missing out" or FOMO. Although AI continues to be a driving force behind technology stock prices, last week's focus was on layoffs. More than 23,000 employees from 85 tech companies have lost their jobs this month. Tech giants are cutting costs and repositioning themselves with AI in mind, and some analysts believe this emphasis on efficiency may encourage investors.
This Week: Key Economic Data
Tuesday: FOMC Meeting. Consumer Confidence. Home Price Index.
Wednesday: FOMC Announcement/Fed Chair Press Conference.
Thursday: Jobless Claims. ISM Manufacturing Index. Fed Balance Sheet.
Friday: Employment Situation.
Source: Investors Business Daily - Econoday economic calendar; January 26, 2024
This Week: Companies Reporting Earnings
Tuesday: Microsoft Corporation (MSFT), Alphabet Inc. (GOOG, GOOGL), United Parcel Service, Inc. (UPS), Starbucks Corporation (SBUX)
Wednesday: Mastercard Incorporated (MA), The Boeing Company (BA), Automatic Data Processing, Inc. (ADP)
Thursday: Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), Meta Platforms, Inc. (META), Merck & Co., Inc. (MRK)
Friday: Exxon Mobil Corporation (XOM), Bristol Myers Squibb Company (BMY)
Source: Zacks, January 26, 2024
Food For Thought
"I believe in intuitions and inspirations. I sometimes feel that I am right. I do not know that I am."
– Albert Einstein
Couples Who Work Together, Tax Together
As more households decide to start a business, many couples learn about the tax responsibilities related to such businesses. Here are some things to consider when working together:
As more households are starting their own businesses, it's important for couples to understand the tax responsibilities that come with it. Here are a few things to keep in mind when working together:
- First, it's important to establish whether you have a partnership business or an employee/employer relationship. A partnership business means that both spouses have an equal say in business affairs, services, and capital. An employee/employer relationship, on the other hand, means that one spouse substantially controls management decisions. These relationships involve different tax situations.
- If you have an employee/employer relationship, the second spouse (employee) may be subject to income, Social Security, and Medicare tax.
- If you have a partnership relationship, you may need to report the business income on Form 1065, US Return of Partnership Income.
Please note that this information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov7
Healthy Living Tip
Sleep is an essential part of our lives to maintain good health and keep ourselves energized. But, getting a good night’s sleep isn't as simple as just putting your head on a pillow. Here are some tips that can help you get a better sleep:
• Increase your exposure to bright light during the day. It's not only necessary to keep your room dark while sleeping, but it's also important to get enough bright light during the day. The contrast of bright light and darkness can help to regulate your body's natural clock, known as the circadian rhythm.
• Limit your exposure to blue light in the evening. The blue light emitted by devices like smartphones, tablets, and TVs can disrupt your sleep cycle. To avoid this, try to limit the use of these devices at least two hours before bedtime. Some devices offer a setting that automatically adjusts the light to warmer tones to reduce blue light exposure.
• Maintain a consistent sleep schedule. Try to wake up and sleep at the same time every day, even on weekends. This can help to regulate your body's circadian rhythm and promote better sleep.
• Adjust the temperature of your bedroom. The temperature of your bedroom can also affect your sleep quality. Some studies suggest that temperature is even more important than noise, and some sleep experts recommend keeping the bedroom at around 70 degrees Fahrenheit.
What five-letter word becomes shorter when you add two letters to it?
Last week’s riddle: I am gentle enough to soothe the skin, light enough to reflect the sky, yet hard enough to crack rocks. What am I? Answer: Water.
Photo Of The Week
Sleepy koala on a eucalyptus tree
Footnotes and Sources
2. CNBC.com, January 22, 2024
3. The Wall Street Journal, January 25, 2024
4. CNBC.com, January 25, 2024
5. Slickcharts.com, January 26, 2024
6. CNBC.com, January 26, 2024
7. IRS.gov, July 27, 2023
8. Healthline.com, October 9, 2023
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